Question

1. Determine the impact on each of the following if 2 million formerly unemployed workers decide...

1. Determine the impact on each of the following if 2 million formerly unemployed workers decide to return to school full time and stop looking for work: What will happen to the rates? Will they increase? Will they decrease ? or will they stay the same ?

The labor force participation rate drops since these workers have left the labor force.

The size of the labor force drops by 2 million.

The unemployment rate drops since the percentage drop in the number of unemployed is greater than the percentage drop in the labor force.

#

Rate

Increase/Decrease or Stay the Same

a

The labor force participation rate

b

The size of the labor force

c

The unemployment rate

2. Determine whether each of the following would be considered frictional, structural, seasonal, or cyclical unemployment. Please answer in the blank box.  

A

A UPS employee who was hired for the Christmas season is laid off after Christmas

B

A worker who is laid off due to reduced aggregate demand in the economy

C

A worker in a DVD rental store becomes unemployed as video-on-demand cable service becomes more popular

D

A new college graduate is looking for employment

3. Technological change is an important driver of economic growth. Find a story about a new innovation, (The “Technology” column in the Wall Street Journal Marketplace section is a good place to find one).In addition to providing a link to the article complete the following:

1. Briefly describe the article

2. How will this innovation affect the US production possibilities frontier?

3. Does is it seem to affect employment as well?

4. If so which type of workers will be harmed?

Homework Answers

Answer #1

Question 1

When unemployed persons stops looking for work then they were classified as discouraged workers.

Discouraged workers are neither counted as unemployed nor are taken in the labor force.

These workers will not be counted in labor force. So, labor force will decrease. This will lead to decrease in labor force participation rate.

Number of unemployed will also decrease. This will lead to the fall in unemployment rate.

Following is the complete table -

# Rate Increase/Decrease/Stay the same
a The labor force participation rate Decrease
b The size of labor force Decrease
c The unemployment rate Decrease
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